News and Views KONE History

5/10/2018 News and Views KONE History

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OverviewA look at some of the even ts that helped shape KONEduring its almost 100 years of existence

From Goods to PassengersElevatorshave been used by man to raiseand lower heavy loads for more than twothousand years, but for most of that timethey were not considered safeor rel iableenough to carry passengers. Of course,there wasn't much need for passengerelevators as most people lived andworked at ground level. It wasn't untilthe vertical growth spurt of cities afterthe Industrial Revolution that the passen-ger elevator found a commercial niche.

The f irst flowering of the elevatorbusiness in the late 1800s was poweredby two breakthroughs: the invention ofthe safety gear by Elisha Otis in 1852and Wilhelm Siemens' application ofelectric motors for powering elevatorsin 1880. These innovations made itpossible to transport people safely andeconomically by elevator, thereby trans-forming an industry still in its infancyinto a viable business. They also gavethe Americans and Germans a headstart in this newly emerging market.

KONE Is BornFinland's first electric elevator wasinstalled in the capital city, Helsinki, in1891. It was common practice in coun-tries with small domestic markets to pro-duce elevators under license. Stromberg,a Finnish electric motor manufacturer,was a licensee of Sweden's GrahamBrothers (which, in turn, was a licenseeof Otis Elevator Co. of the U.S.A.).

Stromberg also had a profitablemotor refurbishment business. In 1910,the company decided to separate itsused motor business from its newmotor sales and distribut ion organiza-tion. A motor repair shop called Tarmo(which means "vigor") was transformedinto a Stromberg subsidiary calledKONE ("machine"). Two years later

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Stromberg's elevator department and itsGraham Brothers license were transferredto KONE. Lo re nz P e tr e" , who becamepresident of KONE in 1912, dreamedof building a truly Finnish elevator.

World War IFinland had been a Grand Duchy ofRussia since 1809. During World War I,KONE's industrial capacity was requiredto produce supplies such asartillery shellsfor the Russian army. In the beginning,the company was working out of Strom-berg's former stables. As the number ofemployees mushroomed and lack ofspace became acute, two buildings onAntinkatu (Antti's Street) in central Hel-sinki were purchased to accommodatethe rapidly escalating military production.

After the outbreak of the RussianRevolution in 1917, Finland declared itsindependence. KONE declared its inde-pendence aswell byterminating its licens-ing agreement with Graham Brothers.

Inside KONE's workshop in the mid-191

Civil war in Russia and internalconflict in Finland following indepen-dence brought hard t imes. The numberof KONE employees plummeted from awartime high of 600 to 40, and KONEbegan to manufacture carbide lamps,hockey-skate blades and coffee mills inan effort to stay in business. Neverthe-less, optimism was strong in the newlyindependent country, and KONE startedmaking Finnish elevators in 1918.

The first KONEworkshop, ca. 1911


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(Clockwise, from above, left)1. Office on Antinkatu (Antti's Street), from19122. Manufacturing shell casings during WWI3. KONE President Lorenz Petrell4. Antinkatu workshop5. Antinkatu engineering studio6. KONETower at Talinn Exhibition, 19227. KONE personnel in the Antinkatu courtyard8. One of the first KONE elevators, from theearly 1920's

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KONE elevator in Finland's Parliament House6 KONE NEWS lit VIEWS 4 I 2004


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was no small accomplishmentas few Finns had ever ridden inan elevator and needed to beconvinced of the safety of thisnew method of transportation.

Two years after theHaapaniemi Street factoryopened, sales had grown(from 1.7 mill ion Finnish marksin 1919) to 27.1 million Finn-ish marks in 1929, and thenumber of employees hadclimbed back up to 240. TheGreat Depression, however,was right around the corner.The Great DepressionHarald's son, Heikki Herlin, joinedKONE in 1928. After obtaininghis engineering degree in

1924, he worked for Brown Boveri inGermany and Otis in the United States,learning about innovations in the eleva-tor industry and the latest productionmethods. This knowledge came inhandy when he succeeded LorenzPetreII asKONE's president in 1932 andproceeded to lift the company out ofthe Depression by expanding its prod-uct line and implementing new ideas.

Although Finland was somewhatisolated from the initial impact of the

The factory on Haapaniemi Street

Enter the Herlin FamilyKONE's elevator production hadexpanded from five units in 1918 to100 a year by the early 1920s. Foreigncompetitors set high standards forproducts and services, pushing KONE toimprove quality and driving up prices.

KONE's parent company, Strom-berg, was experiencing serious financialdiff icult ies at this time. Harald Herlin, acivil engineer, was brought in as aconsultant by Stromberg's bankers toimprove profitability. Herlin suggestedselling all non-core businesses andoffered to buy KONE as part of therestructuring. His offer was accepted in1924, beginning a chain of family own-ership and active involvement in KONE'saffairs that remains unbroken todaythrough four generations. Harald Herlinbecame chairman of KONE's Board whileLorenz PetreII continued as president.

Rapid GrowthFrom 1904 to 1920, Harald Herlin hadmanaged his own water and sewagepipe company, which prospered duringthe rapid expansion of Helsinki and itssuburbs. His knowledge and experienceof the construction industry providedinvaluable insight into trends that wouldaffect the elevator business he acquired.

Increasing demand for elevatorssoon rendered the Antinkatu workshop

too small. Herlin's search for additionalspace led him to a margarine factory onHelsinki's Haapaniemi Street, which wasconverted into KONE's first real factory.

Production of both passenger andfreight elevators in the new surround-ings started in earnest in 1927, averag-ing an elevator per day. The next yearKONE secured two demanding, high-profile orders: Stockmann's DepartmentStore and the Finnish Parliament Build-ing. Successful completion of these jobsdid much to establish KONE's reputationas a serious elevator company, which

Inside the Haapaniemi Street factory

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Depression by its remoteness from thecenters of international business activ-ity, KONE suffered from a significantdrop in the number of domestic con-struction projects. While this declinein elevator orders in the early 1930screated considerable hardship at thetime, newly imposed national elevatorsafety regulations created an oppor-tunity for the company to developits service business. KONE becamea forerunner among elevator manu-facturers in exploiting the businesspotential of preventive maintenance.

Recognizing that constructionstarts (and, therefore, new elevatorsales) were unlikely to pick up for sometime, Heikki Herlin launched an initia-tive to diversify into other products.He chose cranes (1933) and electrichoists (1936), whose technology wassimilar to that of elevators but whosebusiness cycle was complementary.Conveyors and conveying systemswere also added to the product range.

In 1933, KONE also beganmanufacturing electric motors. Bymaking all key components in-house,KONE was able to control the qualityof the equipment it sold and the reten-tion of core competence within theorganization. By 1939, the DepressionThe know-how and productivityof KONE employees grew as theystretched to meet the volumeand quality demands of the warreparations program.

The Hyvinkaa factory under construction (1943)

had been replaced by a thriving pre-war economy, and KONE had deliv-ered its 3,OOOth elevator (in a countrywith fewer than 5,000 installed units).

World War IIFinland's World War II experience was astruggle for survival against the aggres-sion of the Soviet Union, first in theWinter War (1939-40) and then in theContinuation War (1941-45). Againstall odds, the outmanned and unde-requipped Finnish forces prevented theSoviet troops from sweeping throughthe country, but the cost was enormous.

KONE lost 26 employees duringthe hostilities. In addition, Lorenz Petrell


and Harald Herlin passed away in 1941.Heikki Herlin succeeded his father aschairman of the Board of Directors whilemaintaining his position as president.

The former margarine factoryhad already proved inadequate to meetthe capacity demands of the pre-warboom. In particular, more space wasneeded to build large crane structures.Demonstrating its faith in war-torn Fin-land's future in 1943, KONE opened apurpose-built crane factory in Hyvinkaa,50 kilometers north of Helsinki.

War ReparationsThe peace treaty between Finlandand the Soviet Union, signed in 1947,included demands for war reparations tobe paid by the Finns. KONE undertookto produce 100 freight elevators, 200cranes (number later reduced), and 72electric hoists. Many of these items wereto be larger and more sophist icated thanany KONE had previously manufactured.

Despite shortages of skilled laborand raw materials, KONE made thedeliveries on schedule. In the process,the company expanded capacity,acquired new skills, and met moredemanding schedules than ever before.The increasing focus on crane manu-facturing (the number of crane unitsproduced actually surpassed elevatorunits in 1948) helped develop thatbusiness line to a highly competitiveinternational level. The heavy labordemands imposed on post-war Finlandby the war reparations program wouldprove to be instrumental in KONE'sgrowth and development in the 1950s.


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RebuildingIn 1952, with war reparations final ly outof the way, KONE turned its attentionto the rebuilding and modernizationof Finland. A surge in the construc-tion of housing and public buildingscoincided with a wave of migrationfrom the countryside to the cities.KONE met the rising demand forimproved vertical transportation withinnovations such as elevator groupcontrols and automatic doors. KONEalso began producing harbor cranes asinternational trade expanded rapidly.

A key contributor to KONE'sgrowth after the war was the spirit ofthe entire work force, which HeikkiHerlin treated as a kind of extendedfamily. By 1954, KONE's personnelexceeded 1000. The family natureof the business grew even strongerwhen Heikki Herlin's son, Pe kk a H e r/i n,joined the Board of Directors that year.

In 1957, KONE established its firstsubsidiary outside Finland, Konehissar ofSweden. Although it was only a smallrepresentative office in Stockholm, themove suggests that Finland's tiny domes-tic market was already too limiting for acompany producing 450-500 elevatorsand more than 100 cranes per year.

Going InternationalPekka Herlin succeeded Heikki Herlinas president of KONE Corporation in1964 at a time when the company wasexperiencing serious financial difficulty.Unlike his father and grandfather, PekkaHerlin had earned his university degreein economics, not engineering .. Heunderstood that KONE's dominant posi-tion in the small Finnish market madeit an attractive target for takeover bya multinational. Something had to bedone to ensure the company's survival.

Two years later (1966), KONEopened a new purpose-built elevatorfactory next to the crane factory inHyvinkaa, The latest production tech-nology and spacious facilities gaveKONE the manufacturing capacity ofa much bigger player. In fact, the newfactory's capacity was three times thesizeof the entire Finnish elevator market!

Two years after the factory wascompleted (1968), KONE shocked Fin-land's business community and the Euro-

Four generations of Herlins in 1962. From the left: A portrait of HaraldHerlin, Heikki, Pekka, and Pekka's sons IIkka (on the left) and Antti.

pean elevator industry by acquiring Swe-den's Asea-Graham, a company largerthan KONE and the elevator marketleader in all of Scandinavia. To raise capi-tal to support its growth, KONE listedits stock on the Helsinki Stock Exchange.

Once the door to the outside worldwas open, KONE's expansion continuedat a torrid pace. After adding companiesin France, Germany, Austria, Spain andthe U.K., KONE stunned the businessworld again in 1974 with the acquisitionof the European elevator and escalatorbusiness of an American giant, Westing-house. This was the second time KONEacquired operations bigger than its own.

During this period, many smalland mid-sized elevator companiesfound themselves unable to keep up

with technological advances such asthe introduction of microprocessors intoelevator controls. The industry experi-enced a period of dramatic consolida-tion. To independent owners, concernedabout the future of companies theyand their families had built, family-con-trolled KONE may have seemed a morecomfortable and reliable purchaserthan its corporate-styled competitors.Another key to KONE's dramaticrise was the Herlin family's ability toreact quickly while managers of rivalmultinational companies waited forbureaucratic approval for their recom-mendations. By 1979, after only 12years of international activity, the shareof KONE's revenue contributed by sub-sidiaries outside Finland surpassed 80%.

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(Clockwise, from above, left)1. One of KONE's first harborcranes (1953)2. KONEwas No.1 in marinecargo access systems in the1980s.3. KONE's patented automatedgrinder feeding system (1960s).4. Complete woodyards weredelivered all over the world.5. Giant bulk loaders reducedthe time spent in port.6. KONE's clinical chemistryanalyzers served hospitals andlaboratories.7. Cranes leaving the Hankofactory in Finland (1983).


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Diverse ActivitiesThe Herlins were not just buyingelevator companies. By the mid-1980s,KONE had developed into a diversifiedcompany. Already one of the world'sbiggest hoist and crane manufacturers,it also had units specializing in woodhandling, marine cargo access equip-ment, mining and bulk-handling equip-ment, warehouse automation, hydraulicpiping systems, and electronic medicalequipment for hospitals and laborato-ries. KONE even owned its own steelfoundry. Elevators and escalators stillaccounted for about two-thirds of thecompany's turnover, but the KONEname evoked different products andservices to different customer groups.

KONE ranked first, second orthird worldwide in most of its busi-nesses. Participation in these differ-ent activities helped cushion KONEagainst fluctuations in constructioncycles and sometimes provided surpis-ing synergies, as when microproces-sors originally designed for medicalinstruments were modified by KONEengineers for use in elevator controls.Federation of Companies

Throughout the eighties KONE con-tinued its unprecedented expansion.From an insignificant player in the Ital-ian elevator market, KONE soared tonumber one with the purchase in rapidsuccession of FlAM, Sabiem and Bassettiand also took over the leading positionin the Netherlands with the acquisitionof Starlift.

Acquisitions brought more thanmarket share. With the companies cameunique histories and company cultures.These subsidiaries spoke different lan-guages, used different currencies, wereregulated by different laws and codes,and sometimes used different systemsof weights and measures. Each had itsown product range and technologyplatform, strategy and business plan,bonus system and personnel policies.Many also had factories that were sorelyin need of investment to bring them upto competitive standard.

KONE took a cautious approachto managing this rapidly growingnetwork. A financial controller wastypically sent from Finland to imple-

ment KONE's rigorous bookkeepingand reporting systems and make surean honest accounting was made to theBoard of each subsidiary's result. As longasoperations were profitable or makingacceptable progress toward profitability,though, local management was givenconsiderable leeway in running theday-to-day business. KONE aimed tobe "Best in Town", and "Local Excel-lence" backed by "Global Resources"described the organizational philosophy.

Growth during this period waslargely based on acquisitions. Industryconsolidation reduced the numberof competitors, and increasing sizeproduced some economies of scale inpurchasing and production. For themost part, however, KONE's manage-ment team was too busy acquiring newcompanies to focus on restructuringits loosely knit multi local organization.

The 1994 signing ceremony forthe sale of Montgomery Elevatorof the United States to KONE.

Time for a ChangePekka Herlin succeeded his father aschairman of the Board in 1987. As achange in Finnish law prevented thesame person from serving simultaneouslyasBoard chairman and president, Eleva-tor Group head Matti Matinpalo becamethe first KONE president in 55 years whowas not a member of the Herlin family.

At the end of the decade, KONEconsisted of five divisions - KONEElevators, KONE Cranes, KONE Wood,MacGregor-Navire and KONE Instru-ments - and other business units suchas GS-Hydro, Warehouse Automa-tion and the Raahe Steel Foundry. Itwas becoming increasingly difficult

to keep pace with all the develop-ments in these different businesses.

Recession hit the constructionindustry in the early 1990s. KONE'srising profitability in the second halfof the 1980s turned into what wouldbe a painful multi-year decline. AsPekka Herlin neared his 60th birthday(1992), it was unclear what directionthe company would take. His choice assuccessor, hiseldest son, Antti Herlin, wasmore interested in cattle breeding thanelevators. The diversified company wasbecoming harder to manage, and it wasclear that major investment would benecessary to integrate all the acquiredcompanies into a global organiza-tion capable of meeting the require-ments of increasingly global markets.

Refocus on ElevatorsPekka Herlin's decision was to begindivesting all businesses but elevators.The shipboard cargo access businesswas sold in 1993; the crane, wood-handling and piping system businessesin 1994; and the steelfoundry and KONEInstruments in 1995. The revenue fromthese saleswas invested in strengtheningKONE's position asa worldwide elevatorand escalator supplier, in effect tradingdiversification for geographic coverage.In 1994, KONE acquired MontgomeryElevator Company, the fourth largestelevator and leading escalator sup-plier in the U.S. Two years later KONEacquired all the outstanding shares ofGermany's O&K Escalators (KONE hadalready purchased 26% in 1987 and anadditional 14% in 1990). These dealsmade KONE the leading supplier ofescalators and autowalks worldwide.

In 1996, Antti Herlin acceptedthe positions of deputy chairman ofthe Board and CEO, clearing up thequestion of succession. A huge invest-ment program aimed at creating aharmonized KONE Model for doingbusiness was launched with the roll-outof a global enterprise resource plan-ning effort. This project signaled thestart of a concerted effort to turn thecollection of acquired companies intoan efficient global organization. Butmost significant of all was thelaunch in March of KONE Mono-Space, the first commerciallyviable machine-room-Iess elevator.



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KONE MonoSpace elevators, launched in 1996, revolutionized theindustry by eliminating the need for the machine room and setting anew standard for performance and environmental friendliness.

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KONE's own R&DCenter inHyvinkaa (est. 1985) reinforcedthe company's commitment totechnological leadership.

The 333-meter Tytyri test shaftgave KONE unparalleled testingfacilities for high-rise elevators.

The KONE ECO3000 escalatorbecame the first truly globalKONE product in 1998.

The Kunshan factory kick-startedKONE's growth in the rapidlygrowing China market in 1998.


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RevolutionKONE MonoSpace was a truly revo-lutionary product. It changed the wayarchitects designed their buildingsand elevator suppliers designed theirproducts. It caught the competitiontotally off guard, creating a windowof opportunity in which KONE wasthe only company able to provide atechnologically advanced machine-room-less traction elevator at a com-petitive price. The competition tookseveral years to develop offerings oftheir own, by which time KONE hadalready sold nearly 100,000 units.

The technology platform thatmade the MonoSpace solution soattractive was based on the high-per-formance characteristics of the KONEEcoDisc hoisting machine. While othercompanies tried to adapt existing tech-nologies for machine-room-Iess applica-tions, KONE developed a full range ofproducts based on its new space-savingand energy-efficient EcoDisc technol-ogy: KONE MiniSpaceTM elevators formid-rise, KONE Alta for high-rise andKONE TranSysTM for freight elevators.

Perhaps of even greater sig-nificance to KONE's development, theEcoDisc technology platform enabledKONE to reorganize its entire elevatorsupply line. At one point in the 1980s,KONE had 28 elevator factories; 10produced complete elevators and therest supplied components. In Europe,alone, KONE companies offered sevencompletely different "standard" eleva-tors for the same kinds of applications.The market's enthusiastic reaction to theintroduction of MonoSpace, and thedevelopment of European Union-widecodes, enabled KONE to eliminate allthese single-market models and con-centrate on obtaining economies ofscale from single-source production.

GlobalizationIn a move to improve production andlogistic efficiency, KON E transferredadministrative control of the factoriesfrom national subsidiaries to a GlobalSupply Line organization. StandardMonoSpace production for Europewas concentrated in Pero, Italy and theproduction of more engineering-inten-sivemid- and high-rise units in Hyvinkaa.

The number of component suppli-ers was greatly reduced, with corecomponents made in-house orby key partners and non-essentialcomponents outsourced to reliablemanufacturers. Logistics becamemore efficient as components frommany fewer suppliers were sentto just a few assembly centers inEurope, North America and Asia.

Consistent product platformsled to the development of stan-dard installation and maintenancemethods around the world. Thesechanges increased productivity,improved quality, and significantlyshortened project completion times.

KONE opened a purpose-built elevator and escalator factoryin Kunshan, China in 1998. Thiswas KONE's first greenfield factoryin a quarter of a century and itsfirst in Asia. By 2004 nearly halfof the new elevator and escalatordeliveries were made to custom-ers in the Asia Pacific Area. Sixyears after opening, the Kunshanfactory was significantly expanded.

KONE deepened its collaborationwith japan's Toshiba into a strategicalliance in 1998 and strengthenedit in 2002 through cross-owner-ship and cooperation in a numberof product-development projects.Toshiba Elevators and Building SystemsCorporation (TELC) gained marketshare in japan and China by sellingmachine-room-Iess elevators basedon KONE MonoSpace technology.

Looking for GrowthConsolidation in the elevator businessreached a point by the turn of the 21stCentury where few independent mid-sized companies were left in Europe orAmerica. Construction activity leveledoff in many markets, and the expectedwave of modernization of existingequipment in aging buildings wasslower in materializing than anticipated.

Unlike the elevator business,the 'automatic building door servicebusiness, which KONE had entered inFrance in 1980, was not consolidated atall. The skil ls required for door repair andmaintenance were not so different fromthose needed in the elevator business,and many of the customers were the

Kalmar, the world's leading container-handling company, Hiab, No.1 invehicle-mounted load-handlingequipment, and MacGREGOR, themarine cargo access leader, formed thbackbone of Kone Cargotec.

same. KONEmade a few strategic acqui-sitions and alliances and soon becamethe leading company in the field.

In 2002, KONE acquired Partek,a Finnish industrial engineering com-pany with divisions specializing incontainer handling, load handling,forest machinery and tractors. Partek'sturnover was equal to KONE's, makingthis the third time KONE had boughta company at least as large as itself.

KONE's first steps upon returningto the materials-handling business wereto exploit potential synergies in sourc-ing and administration. The tractor andforest machine businesses, too small toprosper on their own or be developedwithout major investment, were sold.At the end of 2004, MacGREGOR, aformer KONE company, was reacquired,thereby adding the leading market posi-tion in shipboard cargo-handling solu-tions to existing market leadership incontainer handling and load handling.

To enhance shareholder valueand market focus, KONE's Board ofDirectors obtained authorizat ion at theend of 2004 to split into two separatelylisted companies in june, 2005: KONECorporation (elevators, escalators &building door service) and CargotecCorporation (materials handling).



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In the 21st Century, KONE has made a conscious effort to replace afocus on technical solutions with a focus on customer needs.

KONE has become the world's leading building door servicecompany through acquisitions, organic growth and strategicalliances.

When the 80-story Q1 residentialtower on the Gold Coast inQueensland, Australia is finished,it will be served by KONEAltaelevators traveling at 9.0 rn/s.



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Field Mobility (left)and KONECustomerCare Centers (right)are vital componentsof the KONE Proximityconcept that is central,along with KONE Carefor life, to KONE'scomprehensive serviceapproach.

The revolutionary KONEMaxtSpacet'" technologyplatform (below) makes it possible for fullreplacement of existing elevators to increase the sizeof the replacement unit by as much as one third.

Cooperation with Toshiba ledto the use of KONE EcoDischoisting machines in the world'stallest building (below), theTaipei Financial Center in Taiwan.

Having carvedout a marketpresencewith KONEMonoSpaceand KONEMiniSpaceelevators, KONEChina enteredthe high-speedmarket withKONE Altadeliveries toFinancial Streetin Beijing (right).

KONE opened this greenfield component factoryin Ustl nad Labem, the Czech Republic, at the endof 2004.



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TheElevator BusinessA brief look at the proud history of KONE's leadership in the elevator industry.The manufacture of KONE elevatorsin the early 1920s gave little hint ofthe promise of innovations to come.Because Finland had no high-risebuildings, and its construction indus-try was largely engaged in buildingaffordable housing for people movingfrom the countryside to the city, mostelevators were of simple construction.

looking AheadAfter Heikki Herlin joined KONE in 1928,he was quick to introduce efficient trac-tion-sheave hoisting machines into thedesign process for new elevators. By1931traction-sheave elevators accountedfor 77% of all units sold. During hisyears abroad Herlin had also becomeacquainted with other inventions, suchas leveling devices and sliding safetygears, which would become standardon KONE equipment by the late 1930s.

The arrival of the first KONE collec-tive controls on the market in 1954 sig-naled the start of a significant period oftechnological progress for the company.Just three years later, KONE instal led itsfirst fully automatic doors on elevatorswith a new record travelling speed of1.5 m/s. In 1959, KONE instal led its firstgearless elevators. These innovationsstrengthened the competitive skills ofthe company and prepared the way forits expansion into international markets.

Behind these technologicaladvances stood a trio of highly skilledtechnical directors: Wa lte r ja ko bs so n(1916-47), E rik In g va l/ (1947-55) andL a rs E rik ss on (1955-64). These menhelped transform a modest Finnish


licensee of other companies' tech-nologies into a technological innova-tor capable of competing successfullywith the world's leading suppliers.

Automation BeginsWith the completion of the newHyvinkaa elevator factory in 1966,KONE entered a new era. The factorywas equipped with the latest auto-mated machinery. No time was wastedin acquiring the first numerically con-trolled machines; a Japanese Makinomachining center was added in 1970.

In the 1980s, Just-In-Time pro-duction, which owed much to theadvanced machines acquired in the1970s, significantly changed KONEproduction methods by substitutingcell organization for assembly lines.Many of the acquired factories hadbeen accustomed to manufacturing tostock. By requiring an actual order totrigger each step of the manufacturingprocess, KONE began its highly success-ful t ransformation from a company witha large amount of its own capital tiedup in work-in-progress and stocks to acompany with negative working capital.

KONE established itself asa leaderin drive systems in the late 1960s bythe introduction of TAC drives, whichoffered customers a cost-competitiveAC drive with soft starting and stop-ping features. The SCD static converterdrive of the 1970s-80s and the V3Fvariable voltage/variable frequencydrive unveiled in 1990 made sure thatthe company held its ground in thecompetit ion for superior drive systems.

A machine room from the 19305.

A KONE hoisting machine fromthe 19205.


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This state-of-the-art Makino Mep 108-A machining center, acquiredby the Hyvinkaa elevator factory in 1970, symbolized KONE'scommitment to production quality.

TMS900 ModernizationOverlay (left) made itpossible in the 1980sto improve the traffic-handling performanceof a multi-car group ofelevators while takingone unit out of servicefor modernization.

KONE began making group controls in the 1950s. The control panelpictured here is from 1967.

MicroprocessorsThe use of microprocessors in elevatorsbegan in the 1970s when the OMS pro-cessor, originally developed by Ollituote,forerunner of KONE instruments, wasadapted for use in the new KONE TMS500 elevator control system. The TrafficMaster System (TMS) family of control-lerswas quickly recognized asprovidingleading-edge solutions for both new ele-vator installations and modernizations.

In the early 1990s, KONE intro-duced artificial intelligence into itsKONE 9000 elevator control systemsfor high-rise buildings. The systemlearned the actual traffic patternsgenerated by users and then improvedits own performance by anticipatingthe system's requirements at differenttimes. KONE 7000 SerTrans featureddistributed intelligence and serial trans-mission capabilities, making it easierfor KONE to tailor elevator solutions tomeet individual customer preferences.

Manufacturing to stock (above)ended with the introduction ofJust-In-Time production in the1980s.

The TMS 516 (below) was KONE'sstandard controller in the 1980s.

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Setting the StandardIn 1996 the revolutionary KONE Mono-Spaceelevatorconcept, powered by theKONE EcoDisc hoist ing machine, waslaunched. Developed by engineers in thecompany's own R&D center in Finland,KONE MonoSpace quickly establisheda new standard for low-rise elevators.

KONE EcoDisc is a synchronousAC gearless machine with extraordi-nary performance and energy-savingfeatures. Its "pancake"-like designmakes it possible for the EcoDisc tobe mounted between one of the guiderails and the shaft wall, eliminatingthe need for a machine room (whichcan represent one fourth of the costof a low-rise elevator installation).

The environmentally advancedKONE EcoDisc is oil-free and energyefficient, saving up to 60% of theenergy costs attributable to compa-rable traction or hydraulic units. Nowonder demand for KONE Mono-Space elevators took off quickly!

The KONE MonoSpace Concept

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The EcoDisc factory in Harneenlinna, Finland.

Reaching New HeightsThe V3F variable voltage/variablefrequency drive and synchronous ACgearless technology of the EcoDischoisting machine used on KONEMonoSpace elevators also provedto be ideally suited for heavy-dutyfreight elevators and high-speedelevators for the tallest skyscrapers.KONE MiniSpace (mid-rise, 1998),KONE Alta (high-rise, 2000) andKONE TranSysTM (freight, 2000) f il ledout the range of elevators powered byEcoDisc. Crucial to the developmentof new units was the 1998 opening ofthe Tytyri elevator laboratory and 333-meter test shafts in a limestone mine notfar from the Hyvinkaa factory, enablingKONE engineers to verify performance ofthe equipment at speeds up to 17.0 m/s.

The KONE MaxiSpaceTM tech-nology platform, unveiled in 2004,uti lizes a new generation PowerDischoisting machine and unique ropingarrangements to eliminate the coun-terweight in traction elevators. Withneither machine room nor counter-weight, KONE MaxiSpace offersmaximum car space for the size of theshaft. For this reason, it is ideal for thefull replacement of existing elevators.

In the 21 st Century, KONE isincreasingly focusing its research andproduct development efforts on cus-tomer requirements for improving thesafety, performance and maintainability

KONE Alta Machine Roomof existing equipment. Remote monitor-ing services,module-based maintenance,full replacement of existing units and theinstallation of new elevators in existingelevatorless buildings are some of theways KONE is helping to ensure safe,comfortable and reliable access for allto space above and below ground level.

KONE EcoDisc


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TheEscalator

Although KONE delivered its first escala-tors to Stockmann's Department Store inHelsinki in 1930, demand for escalatorsin Finland remained limited, and thecompany saw no need to manufac-ture its own equipment. Trusses andmachinery were supplied under licenseby Carl Flohr Co. of Berlin with KONEmanufacturing the controls and a fewother parts. The severance of this distr i-bution deal during the WWII left KONEon its own, but crucial componentswere sti ll imported from other suppliers.

KONE briefly served as a distribu-tor for Germany's O&:K escalators, butthat arrangement came to an end withthe 1974 acquisition of Westinghouse'sEuropean elevator operations. TheWestinghouse deal included a pur-pose-built escalator factory in Diors,France, near Chateauroux. By 1977,the factory began producing a KONEescalator range, making the com-pany a major player on the market.

Global MarketUnlike elevators, which were tradition-ally local items governed by protectionistnational codes and standards, escalatorshave long been global products. Onereason is that relatively small marketsand high entry cost discouraged smalland mid-sized elevator companies fromcompeting for escalator contracts.

From early on there have beentwo basic types of escalators: transitand commercial units. Transit escala-tors, also known as heavy-duty models,are designed for heavy traffic and mustfrequently withstand the harsh condi-tions of an outdoor operating envi-ronment. Commercial escalators areintended primarily to serve departmentstores and building lobbies. They don'tneed to be as robust in their construc-tion as transit units, but the design andattractiveness of the models plays a moreimportant role in the selection process.

Business

Escalator installation at Stockmann's Department Store (1930).

O&K and Montgomery KONE purchased the remain-ing O&:K Escalator shares in 1990 and1996. In between (1994), MontgomeryElevator Company of the United Statesalso joined the KONE family. Mont-gomery, only number 4 in elevators inthe U.S., was number 1 in escalators.

Following the completion of theO&:K and Montgomery deals, KONEfound itself inthe position of world leaderin the supply of escalators and autowalkswith a global market share of more than20% and manufacturing facil ities in Ger-many, France, the U.K. and the U.S.A.

KONE took its next important steptoward global escalator leadership withthe purchase of a minority interest inO&:K Orenstein &: Koppel's escalatorbusiness in 1987. The Diors plant wasadded to O&:K's chain of factories, andKONE began selling O&:K escalators inall markets but a few countries, suchas Germany and the U.K., where O&:Khad a strong sales organization. O&:Kbenefited from KONE's worldwide mar-keting coverage and after-sales service.



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O&K and Montgomery comple-mented each other in many ways. O&Kwas especially strong in heavy-dutyescalators for railway and urban masstransit systems. Montgomery domi-nated the American market with airport,shopping center and stadium deliveries.KONE's First Global ProductA project was started in 1998 tocombine the best features of O&K,Montgomery and Toshiba escalatorsinto a single global product. Find-ing a common solution was far fromeasy for engineers from such differ-ent cultures, but in 2000 the KONEECO3000 escalator was launched.

The KONE ECO3000 escalatorfeatures a lubrication-free step chainand chainless drive, greatly reducing theamount of oil needed and extending oilchange intervals to nearly double thatof coventional escalators. The compactdrive also enables the KONE ECO3000to be installed in 10% less space thanrequired by competing models.

The global design has enabledKONE to manufacture identical escala-tors in Europe, North America and Asia.The fastest growing escalator market isinAsia, where over half all escalator ordersoriginate. In 2004, the Kunshan escala-tor factory's capacity was expandedto meet this growing demand.


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Service Excel lenceDuring the early 20th Century, eleva-tor owners were more likely to wait forbreakdowns to occur and then call forrepairs than to pay for regular elevatormaintenance. KONEwas a pioneer in themarketing and delivery of expert main-tenance. In a 1933 issue of KONE's cus-tomer magazine, Hissilehti, Heikki Herlinproudly wrote, "KONE Corporation's ser-vice department's magnificent achieve-ment - an average of just five breakdownsa year - proves that we haven't justbeen repairing defects. We have beenpreventing their appearance throughregular maintenance of the equipment."

The implementation of Finland'sfirst national elevator regulations in 1933greatly increased the demand for regularmaintenance and created a much heavierworkload for KONE'sservice department,which consisted at the time of some 30employees with 900 elevators to main-tain. In the late 1940s, the departmentwas transformed into a separate servicecompany to ensure reliable service whilethe rest of the company was focusedon filling its war reparation orders.

The service business was reinte-grated into KONE, which became onceagain a full-service supplier, in the mid-

Service vehicles in the early 1920s.

1950s. However, in areas where therewas not enough customer density towarrant maintaining a service depotand personnel, maintenance and repairswere handled by authorized dealers.

Multilocal OperationsFrom 1968, when KONE started its rapidgrowth by acquisition, the service situ-at ion changed radically. Suddenly mostof the elevators to be maintained werenot in Finland and not originally sup-plied by KONE. The breadth and depthof knowledge and skill required to keepthem running increased exponentially,not to mention the internationalorganization needed to develop tools,training and the delivery of spare parts.

KONE's approach to this newbusiness environment could best bedescribed as multi local. Service busi-ness requires quick responses andreadily available resources. Servicerequirements have traditionally beenset by local regulations, and workingconditions are established in dialoguewith local unions and work councils.Focus on Service Revenues

When the oil crisis of 1973 struck andnew elevator demand collapsed, theentire elevator industry suddenly founditself saddled with excess manufactur-ing and installation capacity. Its responsewas to refocus on maintenance opera-tions. Competition to acquire the bestof the authorized service companiesbegan in earnest, accompanied insome countries by aggressive poach-ing of competitors' service customers.

By 1978, 50% of KONE's eleva-tor revenue was attributable to serviceoperations. This profitable part of thebusiness was not asvulnerable to cycli-cal fluctuations as the new equipmentbusiness. KONE's transition from anequipment supplier providing aftersalesservice to a fully dedicated customer-service company was well underway.



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DOMACSThe effort by major elevator companiesto increase their share of the service busi-ness met with fierce competition fromskilled entrepreneurs desperate to makea living in the bleak economy of the late1970s. KONE understood that the way todifferentiate itself from these "cowboy"competitors was to create a highly pro-fessional image of the company's serviceoperations. A program called DOMACS(Development of Maintenance andCustomer Services) was implementedin 1979 to improve communicationbetween service units and customers aswell as raise the quality of maintenance.

Thanks to DOMACS and thecont inuing rapid pace of acquisitions,KONE's LIS (elevators and escalatorsunder maintenance contract) tripledfrom 100,000 units of the late 1970sto 300,000 in the late 1980s. Still,the company's highly fragmentedstructure made it difficult to imple-ment consistent practices. Althoughthe organization continued to grow,individual units' basic service methodsremained much the same as they hadbeen prior to acquisition by KONE.

ModernizationWhere KONE was most successful asa service innovator during the 1980swas in the modernization of installedequipment. By upgrading agingequipment with new technology toprolong operative life and increasepassenger comfort, the companydeepened owner and user sat isfactionwith the KONE brand while develop-ing an important new revenue stream.

KONE made a name for itselfas a modernization leader in the late1980s with the introduction of its TMSModernization Overlay (MO), a patch-incontrol system whose advanced traffic-handling capacity made it possible totake one unit from a bank of four ormore elevators out of service duringmajor modernization while maintainingor actually improving the performanceof the remaining elevator system.

The first attempts to industrial-ize the modernization business camewith the development of modular pre-engineered units in the early 1990s. Asproduct l ines became increasingly stan-dardized, it became possible to replacea broad range of individual parts with


Escalatormaintenancekeeps peopleflowing throughairports.

preassembled easy-to-install Modu-lar Modernization System packages.

New ChallengesKONEfaced the diff icult challenge in theearly 1990s of finding a way to improveproductivity and quality at the same time.A massive organization-wide quality pro-gram was carried out, providing a strongplatform for implementing global meth-ods for maintaining the EcoDisc gen-eration of equipment launched in 1996.

Searching for growth opportuni-ties, KONE turned in the waning yearsof the 20th Century to the buildingdoor service business. KONE Francehad demonstrated in 1980, followedby KONE Belgium in 1986, that build-ing door service and elevator servicecould be mutually supportive. KONEbegan a concerted effort to gain globalmarket leadership in this business anddevelop synergies with KONE's existingoperations. Major moves in the earlyyears included the acquisitions of theU.K.'s Bolton Brady in 2001, Waldoorof the Netherlands in 2003, DoorSystems of the U.S. in 2004, and theformation of a strategic alliance, alsoin 2004, with the global Dorma group.Proximity f i r Care For Life

In the 21s t Century, increasing com-petition in the maintenance sector hasmade productivity improvement anongoing necessity. At the same time,customers are becoming both moresophisticated and more demanding.

Training mechanics in different parts of the worldto meet KONE*s high quality standards.


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Looking for ways to improve pro-ductivity without compromising quality,KONE turned to new technologies forsupport. The KONE Proximity conceptinvolves the use of advanced datacommunication and analysis to makeelevator travel safer and service faster.KONE Customer Care Centers (KC3)form the nerve center of a networkinvolving KONE Remote MonitoringSystems (KRMSTM),Field Mobility appli-cat ions, Module-Based MaintenanceMethods, and e-Optimuml" contracts.The result is improved transparency inthe KONE-customer relationship, betterunderstanding of customers' people-flow requirements, and higher perfor-mance and reliability of the equipment.

KONE Care for Life introduces theconcept of full-chain life-cycle respon-sibility for equipment under KONE'scare. System upgrades -frorn modularcomponent replacements to the fullreplacement of elevators and escalators-ensure that even aging equipmentmeets current standards of safety andperformance whi le saving customersunneccessary and unexpected expense.Included in the KONE Care for Life rangeof offerings are ways to install elevators inexisting elevatorless buildings, providingaccess for people who cannot use stairs.

Innovative OfferingsKONE FuReXTM,introduced in 2003, isafull-replacement escalator offering thateliminates costly construction work byessentially building a new escalator intoan existing truss. Customers can carry onwith their business while the renovationsare being carried out instead of having toclose off significant parts of their building.

KONE's MaxiSpace tech-nology platform offers full replace-ment of existing low-rise residentialelevators with new KONE DimensionPro units that provide up to onethird more space for passengers,wheelchairs, carriages or packages.

These KONE Care for Life offer-ings and the KONE Proximity toolsdescribed above are examples ofhow KONE's leading-edge technol-ogy, guided by the customer focus ofKONE's service organization, has begunto revolutionize the service business inthe 21st Century, much the way HeikkiHerlin's insights did in the 19305.

The spread of KONE EcoDisc technology has facilitated theintroduction of advanced maintenance methods.The building door service business is a source of growth for KONE.



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MaterialsIt would be difficult to name anothercompany that entered a business in asbig a way, got out of it completely for adecade, and then re-entered it througha startling acquisition the way KONEdid with its materials handling business.From 1933, when KONE built its firstcrane, to 1993, when it began divest-ing all its non-elevator and escalatorholdings, the company became one ofthe world's most powerful suppliers ofequipment for hoist ing, conveying, andshipboard access, then within two yearssold it all and reinvested the proceedsin elevator and escalator operations.

After that difficult divestitureprocess, no one expected KONE'slightning-strike acquisition of Partekin 2002. Having sold crane, wood-handling and shipboard cargo accessbusinesses that were in the top threein their industries, KONE suddenlyacquired the No. 1 in container hand-ling, the No. 1 in cargo handling, theNo.2 in forest machinery and No.5 intractors. When KONE subsequently soldthe forest machinery and tractor busi-nesses, many thought the acquisitionshad only been made to produce short-term gains, but when KONE reacquiredMacGREGOR, the same marine cargo-flow solution and service provider it hadsold nine years earlier, it became clearthat KONE was serious about develop-ing its materials handling businesses.

At the end of 2004, KONE beganpreparing to split into two listed com-panies: KONE Corporation (elevator andescalator business) and Cargotec Corpo-ration (materials handling businesses).

CranesKONE's entry into the crane business inthe 1930s was spurred by similar ities intechnology between cranes and eleva-tors and the complementary nature oftheir business cycles. The first orderscame, naturally enough, from the pulp


HandlingIn, Out and In Again ... in a Big Way

Many of KONE's first cranes were delivered to pulp and paper mills.

and paper industry. Once the industrial KONE Wood delivered entirecrane business was firmly established, wood rooms like the one below.the company turned to harbor cranes.In 1969 a purpose-built harbor cranefactory was opened in Hanko, Finland.Located on the shore of the Baltic Sea,the Hanko factory could load its giantproducts directly from the factory flooronto barges for delivery round the world.

KONE became known as a tech-nology innovator in crane and hoistdevelopment with the introduction ofeddy current brakes, thyr istor steplessspeed controls and inverter drives.Crane automation features becameincreasingly important as KONE soughtto keep pace with automation in the pro-cess industr ies served by its products.

The crane business grew rap-idly by acquisition. The addition ofhoist manufacturers Robbins & Myers(USA) and Verlinde (France) supported


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KONE's abil ity to offer either advancedKONE technology or traditional tech-nology on the same market, widen-ing the company's customer base.

Borrowing from lessons learnedby the elevator side of the company,the Crane Division got serious aboutmaintenance in the 1960s, offeringmaintenance contracts for all makesand types of cranes. By the time thecrane business was sold to a group ofinvestors in 1994, service accountedfor one third of sales revenue.

Ship-to-Shore and BackExpanding world trade fueled demandfor harbor cranes. The ship-to-shoreinterface with these cranes were hatchcovers on the ships being loaded andunloaded. When KONE acquired NavireCargo Gear and International Mac-Gregor, it created the world's leader notonly in hatch covers but in virtually all theaccess equipment through which goodsand vehicles were loaded onto and offshipboard such as RoRo ramps, side-loading equipment, all kinds of marinedoors and rail ferry equipment. The unitwas also involved in the developmentof shipboard elevators. It was sold toSweden's Incentive Group in 1993.

Wood HandlingThe interface of KONE craneswith wood-handling equipment dated from furtherback and appeared to offer even morelogical opportunities for expansion thanthe interface between harbor cranes andcargo accessequipment. KONE had soldelevators to numerous pulp and papermills in northern Europe, and bundlesof wood unloaded by KONE woodyardcranes were subsequenty handled bymany kinds of conveyors and processequipment. KONE engineers, includingHarald Herlin, applied for and receivedpatents for equipment used to handlewood in various parts of the deliveryprocess from forest to mill process lines.

As mills began to modernizein the 1960s, KONE developed anautomated grinder feeding systemthat greatly improved productivity.By 1984, KONE had collected all theequipment related to wood handlingand woodyard automation into theKONE Wood division, whose strength

Giant KONE harbor and shipyardcranes played in important rolein the growth of world trade.

KONE made various conveyorsand coveying systems throughthe mid- 1980s.

KONE Instruments brought cross-over technological innovation tothe elevator business.

lay in its ability to provide entire wood-handling systems. These activities weresold to Andritz AG of Austria in 1994.

Engineering divisionKONE first began supplying conveyorsin the 1930s. The acquisition of RaaheCorporation in 1953 added a conveyorfactory and steel foundry. In 1976 KONEpurchased Roxon's range of miningequipment and hydraulic breakersand combined all its bulk-handlingand mining-related businesses into theKONE Engineering division. The divi-sion was sold in 1986, prior to initia-tion of the major streamlining process.

Instruments & OtherThe KONE Instruments division wasdeveloped from Ollituote, a Finnishcompany that was acquired in 1973.Ollituote started out making electriccattle fences but proceeded to elec-trocardioscopes and clinical chemistryanalyzers. The growth of the businesscoincided with the large-scale buildingof Finnish regional hospitals in the 1960sand the 1970s, but KONE Instrumentsnever reached the point where it couldcompete effectively with major globalcompetitors for business outside Finland.

The main benefit to KONE from itsinvolvement in the medical instrumentbusiness turned out to be the develop-ment of microprocessors and a numberof bright young engineers who eventu-ally found their way to the KONE R&DCenter. KONE Instruments was divestedthrough a management buyout in 1995.

Synergy BenefitsKONE's elevator business and non-elevator businesses benefited in anumber of ways from their relationship.There were synergies in R&D, purchas-ing, and back-office functions. Talentcould be moved around the companyto cope with developing needs.

In the end, however, KONE endedup with too many differing customergroups and markets for a small man-agement team to handle under rapidlychanging conditions. The decision toconcentrate on elevators and escalatorswas seen as a move to replace diversi tywith improved geographic coverage.

KONE NEWS &: VIEWS 4 I 2004 27


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Kalmar is the world's leader in container-handling solutions. Itsproduct range runs from straddle carriers (above) to ship-to-shorecranes (below).

28 KONE NEWS &; VIEWS 4 I 2004

Both the Forest Machines (above) andTractor (below) businesses proved to bsmall to fit into KONE'sdevelopment pand were sold to major global competit

Back in the BusinessFor nearly 100 years, Partek was in thebuilding materials supply business. In1997 management decided to turnit into an industrial engineering com-pany. After an extremely active periodof acquisition and restructuring, thecompany found itself with a collec-tion of separate businesses and a debtburden that made it hard to raise newcapital for operating improvements.In May, 2002, KONE made anoffer to Partek's principal owner, thegovernment of Finland. The deal wasaccepted, giving KONE the necessaryclout to acquire the rest of the outstand-ing shares. Partek's turnover was roughlyequal to KONE's at the time, making theacquisition the third in KONE'shistory thatdoubled the company's size overnight.


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Two of Partek's divisions wereglobal market leaders: Hiab (containerhandling) and Kalmar (container hand-ling). Forest Machines (using the Valmetname) was number 2 worldwide but toosmall to stand alone, and Valtra (trac-tors) was only number 5. KONE soldValmet to the Japanese Komatsu ofJapan in late 2003 and Valtra to Agcoof the United States in early 2004.

Seeking SynergiesThe remaining brands, Kalmar and Hiab,became the KONE Materials Handlingdivision, which was renamed KoneCargotec in 2004. Also in 2004, KoneCargotec reacquired MacGREGOR,the marine cargo access solutions pro-vider KONE had sold ten years earlier.

With MacGREGOR, Kalmar andHiab all on board, Kone Cargoteccould cover the entire logistics chainfor goods traveling from land origin toland destination via harbor and ship.The rapid expansion of world tradeoffered strong growth opportunities,and KONE management was convincedthat it could help its materials-handlingunits increase their profitability fromthe low levels at the time of acquisition.

One strategy for improving per-formance was to look for synergies andsavings from inclusion in a larger, moreprofitable organization. A number ofadministrative functions were merged,and immediate steps were taken toutilize the greater purchasing powerof the combined companies. KONEalso believed that its materials-handlingunits could benefit from developingtheir service offerings and organization.

Obtaining ResultsCargotec dramatically improved itsperformance during its first years withKONE, doubling its profitability. Betweenthe saleof the non-core parts of the busi-ness and the increased profits, KONEwas able to reduce substantially thedebt incurred in purchasing Partek andmake the investment in MacGREGOR.

By 2005 the KONE Board felt thatboth KONE Elevators & . Escalators andKone Cargotec were in good enoughshape to stand alone. In order to clarifymanagement direction and help inves-tors understand the value of the shares

they were being offered, the decisionwas made to create two separate com-panies, KONE Corporation and CargotecCorporation. Eachwould be listed sepa-rately on the Helsinki Exchanges, creat-ing maximum flexibility in developingbusiness initiatives and making it possibleto react to market developments quicker.

Materials handling became a partof KONE operations in the 1930s, exitedin the 1990s, and then came and wentagain in the space of three short yearsat the beginning of the 21st Century. Itleft its mark on KONE's history, but from2005 KONE's identity was clearly definedasa specialist in the people-flow business. MacGREGOR was welcomedback into the KONE family in

2004 as part of Kone Cargotec.

The Hiab brand covers the industry's broadest range of mounted anddemountable load-handling products from loader cranes and tippinggears to tail lifts, and piggy-back fork lifts (below).



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BehindEach of the four Herlins to head thecompany has made a significant con-tribution to shaping the company andits culture. When Harald Herlin tookover from the Stromberg organizationin 1924, KONE was just beginning todefine itself asan elevator company. Hetook it from a series of cramped work-shop environments to a factory largeenough to support expansion and usedhis contacts and understanding of howFinland's cities were likely to grow toput KONE into the driver's seat in theyoung and expanding elevator industry.

Heikki Herlin's strengths asKONE'sleader included deep knowledge of thetechnical end of the business, gooddomestic and international connec-tions and a charismatic personality. Hepracticed "management by walkingaround" and was known to peer overthe shoulder of a design engineer atwork, grab an eraser and pencil fromhis desk, and "improve" his drawing.

Heikki Herlin had anabiding inter-est in quality and tried to make surethat KONE's manufacturing standardsand service performance were at thehighest levels. He took a paternalisticinterest in the welfare of his employees,sponsoring Finland's first company-wideChristmas party and summer camp foremployee children. This highly personalapproach was possible because at theend of the 1950s KONE still had justunder 1300 employees, and all but ahandful were located in Finland. Therewere just two KONE factories, andboth of them were in Finland as well.

Scientific ManagementThe global expansion of KONE opera-tions under Pekka Herlin required avery different corporate managementstyle. Pekka Herlin, or "PH", as hewas known, concentrated on strategicissues and the recruitment of compe-tent managers to whom he delegatedthe running of the company's dailyoperations. KONE's long-time auditor,An tti H e le n iu s, wrote of him: "I get theimpression that the people he trusts are


the Scenes

Heikki Herlin practiced what today might becalled management by walking around.

given complete freedom in their work.Through financial control and reporting,he then tries to monitor whether theseindividuals are worthy of that trust."

Under Pekka Herlin, newlydeveloped "scientific management"principles and systems were enthusi-astically adopted. In the early 1970sKONE became one of the first Euro-pean companies to computerize itsadministrative functions and imple-ment a modern planning, budgetand control system in all its units.

In 1972, a tripartite training pro-gram consisting of IMD (InternationalManagement Development), RMD(Regional Management Development)and SMD (Supervisory ManagementDevelopment) modules was intro-duced. "We need competent manag-ers capable of taking independentaction in every part of the organiza-tion," Herlin insisted. "There is noway that problems spread all over theworld can all be solved from Helsinki."

Loose ConfederationKONE's acquired companies continuedto function for the most part as inde-pendent profit centers. These compa-nies often brought with them deeplyimplanted traditions (some datingback over 100 years), and personnelwho might have have reacted poorly tobeing put on a short leash by managersfrom distant Finland. KONE's respectfulapproach, maintaining much of thetouch and feel of the acquired company,alsohelped to minimize customer flight.

Some features of this organiza-tional approach, however, began toseem less attractive as the businessenvironment becamemore internationaland finally global. Acquired companiesbrought with them legacy systems. Bythe mid-1990s, for example, KONEoperations were hampered by an incred-ible confusion of harware, software andincompatible data. The samespare part,might havedifferent identification num-


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The International Management Developmentprogram was launched in 1972.

Roll-out of the KONEModel in the late 1990sinvolved international teamwork.

Acquired companies broughtwith them different cultures,ways of working, technologiesand skills. Many had neglected

investment in productionfacilities for some time. Duringthe 1980s and '90s, much workthat had previously been doneby hand (left) began to be

carried out by robots (right).

Constant growth through acquisition made integration and harmonization difficult.



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bers in different parts of the company.For far too long drawings still had to beprinted and mailed from one unit toanother because their computer systemscouldn' t read each other's files. Lack ofharmonization prevented KONE fromresponding rapidly enough to marketchanges and customer requirements.Harmonizing Operations

It fell to CEO Antti Herlin and theKONE presidents working withhim to streamline and harmonizethe empire assembled by his father.In 1996 the Zeus Project began thearduous process of standardizingKONE business practices on a globalscale. This initiative developed into theimplementation in all major units of theKONE Model, based in a global entre-prise resource planning (ERP) system.

The globalization of KONE'scustomer base also led the companyto develop global strategies for deliver-ing products and services. The GlobalResearch and Development functiondesigns, and the Global Supply Linemanufactures, products that can bemarketed, installed, maintained andmodernized by consistent methodsanywhere in the world. This consis-tency ensures customers of the samehigh quality in products and serviceswherever they might need them.

KONE began reorganizing its busi-ness units across borders at the start ofthe 21st Century, creating mega-unitsin clusters of countries sharing similarbusiness cultures. The first such units inScandinavia and Mid-Europe were fol-lowed by the strengthening of opera-tions in KONE Middle East and theregrouping of companies in KONE AsiaSouth. These changes supported therapid implementation of consistent pro-cessesand the efficient use of resources.

Looking EastThe dramatic growth in Asian markets,and especially China, challenged KONE'sability to respond during the first yearsof the 21st Century. At the same time,KONE recognized that its position inSouth America was too small to be madeviable, and the company sold all its busi-ness assets on that continent in 2001.

KONE decision-makers had

32 KONE NEWS & VIEWS 4 12004

KaNE Corporate Officesin Helsinki were housed

in this building from 1975through 2001.

been careful about choosing the rightsite and right partners when enteringChina in the 1990s. Their decisionsproved to be good, but the delay ingetting started forced KONE to paddlefast to catch its fair share of the actionwhile competitors were already ridingthe crest of the construction boom.

In Japan, a difficult market forwestern companies to penetrate, KONEand Toshiba began discussing possibleforms of collaboration many years beforeannouncing in 1998 their intention totake the first steps toward forming aglobal alliance in elevators and escala-tors. Step number one was a licensingagreement for Toshiba to sell machine-room-less elevators based on KONEMonoSpace technology in Japan.

KONE and Toshiba also collabo-rated on the development and produc-tion of the escalator that became knownas the KONE ECO3000. In 2002, thealliance was strengthened and deependby cross-ownership and the extension ofthe MonoSpace licensing agreementto cover the China market. In 2004, theallies agreed to joint global marketing ofdouble-deck high-rise elevators based onToshiba technology. The 101-story TaipeiFinancial Center became the world's tall-est building when it opened in 2004; 34of its elevators are Toshiba double-deckunits powered by KONE EcoDisc.

Summing UpKONE will celebrate its 100th bir thdayin 2010. Any company and its successare the collective achievement of thepeople who have contributed their hardwork to it. In KONE's case, that wouldbe tens of thousands of workers andmanagers in as many as 100 countr ies.

It is also important, however, to

recognize the importance of the stabil-ity and consistency of vision providedby strong leadership. For over seventyyears, KONE has been guided by fourgenerations of Herlins. Likeany companyin a cyclical business, KONE has enjoyedperiods of prosperity and experiencedperiods of belt-tightening. What hasmade it a good place to work hasbeen the principal owners' unfl inchingdetermination, through good times andbad, to forge ahead with a clear focus onlong-term development and profitability.

KONE has developed from atiny machine shop selling recondi-tioned motors into a global technol-ogy leader in a demanding industry.The company's focus has shifted fromequipment to customers, and its busi-ness has expanded from supplyingequipment and services to providingand maintaining people-flow solutions.

Among emerging trends, theincreasing share of machine-room-Iesselevator solutions for new instal lationsand recognition in mature markets ofthe need to modernize aging installedequipment to meet modern safety andperformance requirements suggestthat KONE's strengths will continue tomatch up well with market demand inthe coming years. On the other hand,the combinat ion of increasing cost andprice pressure will challenge KONE'sability to grow at an acceptable pacewhile meeting prpfitability targets.

Tough challenges are nothingnew to KONE. Could a tiny Finnishcompany develop into one of the fewglobal players still going strong afterfour decades of ruthless consolidationin the elevator and escalator indus-try? The odds were against it, but thecompany's record speaks for itself.


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KONE's headquarters, the Munkkiniemi manor in Helsinki, Finland

The KONE Building, housing corporate officesin Espoo, Finland, opened in 2001.

KONE NEWS &; VIEWS 4 I 2004 33


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KONE Board Chairmen

lorenz Petre II1912-1924

Frans lindroos1910-1912

Gerhard Wendt1989-1994

Harald Herlin1924-1941

KONE

lorenz Petrell1912-1932

Anssi Soila1995-1998


Heikki Herlin1941-1987

Pekka Herlin1987-2003

Antti Herlin2003-

Presidents

Heikki Herlin1932-1964

Jean-Pierre Chauvarie1999-2001

Pekka Herlin1964-1987

Manfred Eiden2001-2004

Matti Matinpalo1987-1989

Matti Alahuhta2005-


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News and Views KONE History

Documents

views kone history

kone elevators

transferredto kone

kone personnel

years later4 kone news

numberof kone employees

kone toimprove quality

kone president lorenz